Housing Market: Bubble? | General financial discussion | Discussion forum

This topic is a continuation of the discussion started here: https://www.highinterestsavings.ca/forum/hubert-financial/hubert-2-0/page-3/#p5222 which is a little bit off-topic in that thread, but may be of relevance for the discussion on Arms Length Mortgages started here: https://www.highinterestsavings.ca/forum/your-stories/having-too-much-money-in-rrsps-is-bad/#p3992

guest said:

We have much tighter regulation up here when it comes to who qualifies for mortgage financing. Yes the taxpayer is ultimately on the hook for guaranteeing these mortgages in the case of CMHC-insured loans, but the quality of those loans is higher than in the US, where the taxpayers there had to bail out their versions of the CMHC (Freddie and Fannie) after all those "liar loans" blew up and caused chaos.

While liar/NINJA loans contributed to the US housing crash, the ultimate problem was that house prices, partially due to liar loans, but also due to people who believed the houses were worth what they paid with non-liar loans, were unsustainably high. While there is a qualifying rate that needs to be met in Canada (5 year fixed rate), it is a fairly low rate at the moment. With 35yr/5% down and cash back mortgages that effectively make mortgages 0% down, and the fact that so many people are living paycheque to paycheque, makes for a precarious position in our rocky economic conditions. They may qualify for the 5 year fixed rate now, but what happens if they miss a paycheque? Did you know that the CMHC is leveraged almost as much as Freddie and Fannie were before they got hammered? GDP doesn't appear to be exceptionally better than the US, incomes and rents aren't substantially different, savings rates aren't better. What factors would lead you to believe that the prices are any more sustainable in Canada? I will offer one factor: Mercer's 2011 Quality of Living Report puts more Canadian cities in the top 50 than US cities (http://www.mercer.com/press-re.....eport-2011).

Interested to hear how people here interpret the market data. Would be really interested to hear if anyone knows what our housing stock is like. The US is reported to have 11 million vacant homes!